Idealistics

A big topic of conversation lately has been whether donors really care about impact, or whether they simply just give based on less scientific things like their emotions, or their friends recommendations. Which is why I’m excited to announce that I’ll be participating in a Google Hangout April 30th about using data to attract donors.

To add to this conversation, David Henderson and I are hosting a Google Hangout, “How to Use Real Performance Data to Raise More Money,” on Tuesday, April 30th at 2pm Eastern. David is a super smart guy who runs Idealistics, a consultancy that helps nonprofits learn from their outcomes data, increase impact, and demonstrate results to funders and stakeholders. David’s professional focus is on improving the way social sector organizations use information to implement higher impact poverty interventions. He has been quoted in the Chronicle of Philanthropy and has written for Change.org and the Huffington Post. You can read my interview with him from a year and a half ago here.

David and I thought it would be interesting to host a conversation with nonprofit leaders about how nonprofits can use real performance data to raise more money. We’ll kick off the hour-long conversation with a couple of points and a case study or two of nonprofits that are using data to raise more money, but then we’ll open it up to you for questions. You can send us your questions ahead of time (via email to nell@socialvelocity.net or dhenderson@idealistics.org) or simply post them to the Google Hangout here as you watch.

Can nonprofits that use real performance data to raise more money? Are donor increasingly interested in impact data? How can nonprofits communicate their program data to donors? And how should nonprofits respond to questionable performance claims by other organizations? Join David Henderson from Idealistics and Nell Edgington from Social Velocity in a Google Hangout on Tuesday, April 30th at 2pm Eastern to discuss these and many more questions about how nonprofits can use real data to raise more money. We’d love to have you participate in the discussion, so send your questions ahead of time to Nell or David, or leave a comment at the Google Hangout here.

There is something exciting happening around measuring the value that nonprofits create. Several new efforts are underway to create a system for measuring and comparing how effective nonprofits are.

Just a few years ago, the only measure for a nonprofit’s effectiveness was the percent they spent on overhead expenses. If a nonprofit spent a magic 20% or less on non-program expenses they were deemed worthy of donations. This destructive way of evaluating nonprofit organizations has been losing favor over the last few years as rating agencies like Charity Navigator have recognized the need for a broader evaluation of nonprofit effectiveness. New measures have started to include outcome and impact elements.

But all of this begs the ultimate question which is how do we create a system for measuring and comparing nonprofits across the many social issues and operating models that make up the sector? Because however faulty the overhead percentage measurement was, at least it allowed a comparison of apples to apples. You could see how one nonprofit stacked up against another. But if each nonprofit organization is now creating their own theory of change, and their own outcome and impact measurements, how do we compare those to another nonprofit’s outcome and impact measures?

Enter a host of efforts to solve that very problem. One of these efforts is Markets for Good. They aim to create an infrastructure for evaluating nonprofit effectiveness based on outcomes and impact. You can watch their video explaining their efforts below, or if you are reading this in an email click here to watch the video.

And there are many other efforts to move the nonprofit sector toward measuring outcomes instead of spending practices. These include Idealistics, GiveWell, Philanthropedia among many others. But it’s not clear yet how any of these efforts will be able to analyze and compare the effectiveness of social change efforts because there are many pieces to that puzzle.

To truly be able to evaluate and compare the effectiveness of social change efforts, we have to:

Encourage nonprofit organizations to develop a theory of change, because you can’t measure whether an organization has created change if they have no idea what they are trying to change in the first place.

Give nonprofits resources with which to measure whether their theory of change is actually coming to fruition. Measuring outcomes and impact takes time and money.

Separate a single nonprofit’s efforts to create change from other forces working on the same social problem so that we can understand the effectiveness of a single organization.

Create a standardized system for comparing the ability of one nonprofit organization to create change to another’s ability to create change.

Connect such a system for measuring nonprofit effectiveness to systems already being created for for-profit social entrepreneurs (like GIIRS) so that those with money to invest in social change efforts can compare the social return they would get in a for-profit and/or nonprofit setting.

Communicate the results of those measures to philanthropic and social investors so they can make more informed, more results-focused investments, whether those be to nonprofit or for-profit social change organizations.

To me, comparing the ability of organizations to create social change is an enormous nut to crack. But it is an incredibly worthy endeavor. I applaud Markets for Good and the many other efforts working to create a system for understanding and comparing social change efforts. It will be fascinating to watch this space develop.

In this month’s Social Velocity blog interview, we’re talking with David Henderson. David is the founder of Idealistics Inc., a social sector consulting firm that helps organizations increase outcomes, demonstrate results, and organize information. He has worked in the social sector for the last decade providing direct services to low-income and unhoused adults and families, operating a non-profit organization, and consulting with various social sector organizations. David’s professional focus is on improving the way social sector organizations use information to address poverty.

You can read past interviews in our Social Innovation Interview Series here.

Nell: On your blog, Full Contact Philanthropy, you write a lot about making program evaluation accessible to all nonprofits, even small and under-resourced ones, which is something that a lot of those pushing for evaluation neglect to address. Evaluation can be expensive, time-consuming and poorly executed. What is the essence of good evaluation, and, at a minimum, what should all nonprofits be doing to evaluate their work?

David: Whatever the price tag, a good evaluation helps you make better decisions, a bad evaluation does not. If an organization is not open to changing its course of action regardless of what the data suggest, then evaluation has no meaning. Therefore, the most important step in any evaluation is knowing what you want to evaluate and why.

While some evaluations are expensive, they don’t all have to be. Evaluation does not mean just one thing. There is no one right way to do evaluation. Instead, there are a number of ways organizations can use outcomes metrics to inform their work, ranging from randomized control trials (most accurate and most expensive) to simply monitoring whether a few key indicators are getting better or worse.

More important than the certitude of any one evaluation is the regularity with which an organization uses metrics in decision making. It’s not terribly costly to start every staff meeting with an update on how the people you are helping are doing. But this discipline helps create cultural commitment to using outcomes data in decision making, which is really at the core of any good evaluation strategy.

Nell: Is everything in the social change arena measurable? Are their some public good efforts that are so complex or have so many variables that we cannot measure them, yet they still need to happen?

David: When we think about measurement, we tend to imagine a numeric, linear scale with start and end points. Not everything is quantifiable, but that doesn’t mean it’s not measurable.

Organizations collect information all the time. Some of that data is quantifiable and gets stored in spreadsheets and databases. But we also get a lot of important information through visual observations and conversations.

All of this information, quantitative and qualitative, objective and subjective, helps inform decision making. Taking the information we have and establishing evaluative frameworks that help us make systematic program decisions is the real challenge.

Nell: How does government fit into the effort for social change? Can and is government changing quickly enough to keep up and to have a relevant place?

David: Ideally, the non-profit sector would innovate and test social interventions, and governments would take the best innovations to scale. But successful social innovation requires cultural commitment to both evaluation and failure. And in the current funding environment, failure is not an option. That’s a big problem.

With so much pressure on organizations to show evidence of impact, instead of investing in innovating new social solutions, non-profits are hiring marketing consultants shrouded as evaluation experts to help them tell their stories.

If the government is to invest in and scale what works, as the federal Social Innovation Fund purports to do, organizations have to be free to report what does and what does not work. So long as our focus is on story telling instead of truth telling, it’ll be difficult for non-profits to have the latitude to experiment and evaluate freely, leaving the government precious little worth scaling.

Nell: Your particular interest is social change efforts to alleviate poverty. But since poverty is the result of some very serious failures in America’s infrastructure (inadequate education system, broken health care system, etc) is it possible to fix the results of those inadequacies without addressing those much larger structural deficiencies? Or can social entrepreneurs do both?

David: Poverty eradication has to be the goal, but alleviation is pretty darn important to the 43.6 million Americans and billions more worldwide living in poverty today. Social entrepreneurs as well as a myriad of government efforts address both structural causes and the many harms resulting from poverty.

Regardless of a particular intervention’s focus, every effort is more likely to succeed when informed by regular outcomes assessments. Since my firm’s focus is helping organizations use client metrics to make higher impact program decisions, we work with all types of organizations across the anti-poverty spectrum.

Nell: How does your company Idealistics fit into the solution to poverty?

David: Our practice is about helping organizations make smart, high impact decisions that increase social outcomes. Everything we do is underscored by a vision of a social sector that uses evidence in the crafting, implementation, and iterative evaluation of its interventions.

Probably the most important thing we do toward that end is helping organizations establish decision frameworks. A decision framework converts an agency’s theory of change into a tool, or a mathematical model as we think about it, that organizations can test, update, and use in the design and execution of their interventions.

With a solid decision framework in place, we provide analytically oriented consulting and technology systems that help organizations establish data collection pipelines to make sense of their information.

While a lot of our customers hire us so they can better prove to their funders that they’re making a difference, that isn’t our objective. But the fact is our customers do very well with their funders.

Our clients are able to uniquely demonstrate an analytical approach to their work, and have the evidence they need to back their claims of progress, which makes them very competitive in the evidence-deficient social sector landscape. However, for me and my team, the real gratification is not that our customers impress their funders, but that they are better positioned to change the lives of the people they serve.